Coronavirus is a catalyst that has caused a domino effect throughout the logistics industry, especially combined with various external factors. Once one thing goes awry in the industry it can cause a variety of effects throughout the rest of the supply chain. Container shipping has always been a popular way of shipping cargo, however recently it has risen in popularity, shortages are being reported, COVID outbreaks are happening, China is being sanctioned, and there has been a rise in pirate attacks. Carriers and shippers are working hard to supply the high demands, but there is no quick and easy solution. Overall, how has the industry been affected recently with various external factors?
Surge in Piracy
The image that is conjured up by talk of a pirate is someone like Johnny Depp’s Captain Jack Sparrow–a pegged leg man with an eye patch, and a parrot on his shoulder. However, the pirates of the ocean today are much less fun in character and are making several shipping lines walk the plank. Cargo ships that are traveling the oceans, transporting goods between countries, are being targeted by said pirates.
The pirates’ main goal is to appropriate the cargo aboard the vessel, but the parties most affected by these attacks are the crew members and inhabitants being held hostage and threatened for ransom.
Since 2011 the amount of pirate attacks on cargo ships has been steadily declining. In 2010 and 2011 there were approximately 445 attacks reported in the world. The number of reported attacks went down to 162 in 2019. However, recent attack numbers for 2020 have been on the rise by 20%, in tandem with Coronavirus. Most attacks have been reported in the regions of Africa, Malaysia, and Indonesia likely being targeted for their abundant natural resources. For example, in 2018 the oil prices were around $70 per barrel. Therefore, an oil tanker ship traveling across open waters creates a perfect opportunity in the eyes of pirates. Due to the Coronavirus less ships are moving, which is creating a perfect scenario for pirates with less people around to help. Around New Guinea they are seeing more pirate activity than they have ever seen. The surrounding countries, as well as the US and France, are doing their best to intervene and help reduce the threats. Ultimately, international shipping routes have been severely impacted, and the global economy has lost billions of dollars surrounding pirate attacks on container shipments in open waters.
Wholly, the container shipping industry was in danger as the onset of Coronavirus shutdowns took place. Lockdowns were being enforced and companies were forced to halt shipping and had to shut down their vessels. Factories had to shut down their warehouses temporarily, and without production and shipments running ocean transportation was battling to stay afloat. In quarters 3 and 4 of 2020 factories returned to work and the need for container shipping skyrocketed. As more and more people continued to work remotely computers, furniture, and other home office essentials were on back order; many of which were coming from Asian markets. Compounding this issue, most containers that were empty were still in European and American ports from when lockdowns were taking place. As a result, the shipping rates coming from China to America and Europe have tripled, and the container shipping rates for North American lanes to China have doubled.
The demand for goods has consistently risen over the past couple months, as supply struggles to keep up. This shortage of containers and goods has caused turmoil for rates, capacity, and transit delays. The turnover for containers has been slow as new containers are being ordered, but there is no fast solution for the shortage. Another factor contributing to the delays is the Chinese New Year. As most of the demand for goods and containers needed is coming from China, the delays are going to be more affected. Containers are said to be on at least a 3-week backorder and as the demands continue to rise. This trend in ocean freight containers is expected to continue through at least Quarter 2. Other options are always being considered to ease all shipping lanes such as intermodal and air freight. However, with the current demands there are going to be expected delays.
COVID Outbreak in California
As Coronavirus is still prevalent in the United States, the number of cases is dropping and the vaccinations are rising, however California is still being crippled by the virus. In Los Angeles, the LA/Long Beach port complex is stationed in the middle of all the chaos. As an epicenter for the mass amounts of imports, the port is an important factor in the supply chain, and supply and demand is wreaking havoc on Port Authority. Consequently, the LA/Long Beach port is experiencing a spike in ocean freight imports. Recently, the port has been affected greatly by the threat of the Coronavirus and has created more delays than there were before for shipping and receiving containers.
The rates of infections are becoming troublesome, and there are talks of shutting down the port, but given the rise of imports that is an unlikely scenario. The dockworkers union and the employers are doing their best to curb the infection rates and at the same time keep the port running efficiently. In January there were reports of over 600 dockworkers testing positive, with speculation that not all cases are being reported. To strengthen the success of the supply chain, there have been talks with the government and top stockholders to get these essential dockworkers on a higher prioritization level for vaccines. All parties are wanting to prevent any further shut downs and delays surrounding imports and exports and are working together everyday to come up with the various solutions in the meantime.
Many external factors are affecting the current container shipping market, and the logistics industry as a whole. Carriers, shippers, and others are doing their best to help ease the market and the rates. We at ATS Logistics are always on top of the market trends and we hope to help our customers navigate them as best as we can!